By Kevin E. Noonan --
A panel of former Solicitors General and Assistant Solicitors addressed recent Supreme Court precedent in patent law during the BIO International Convention last month. Moderated by former Federal Circuit Chief Judge Paul Michel, the panel consisted of Seth Waxman, former Solicitor General now at Wilmer Hale; Paul Clement, another former Solicitor General now at Bancroft PLLC; and Thomas Hungar, former Assistant Solicitor General now at Gibson Dunn LLP.
Judge Michel began the discussion with the Microsoft v. i4i case. Mr. Waxman, who represented prevailing respondent i4i, went first. He professed to be unsurprised that the Supreme Court decided the case in favor of the patentee and affirmed the Federal Circuit. Mr. Waxman mentioned the Court's renewed interest in patent cases, and that an affirmance is surprising only because patent cases do not have the possibility of a circuit split, so that when the Court grants certiorari it is usually to reverse. He said he considered the "real stunner" the decision in Stanford v. Roche because the Court sided with the inventor, but he tempered the significance of this decision by remarking that Stanford, the patent-holder, lost. He admitted that the "superficial" view was that the Court was going to reverse in i4i, because the case represented another instance of the Federal Circuit deciding in favor of the patentee based on its particular interpretation of the statutory language. However, he also identified three levels of issues in the case: the proper interpretation of the relevant provisions of the 1952 Patent Act; the Court's own precedent; and the public policy issues of industrial policy and the innovation economy. The latter was the "most Titanic battle" and one the Court purported not to address, in the context of each side arguing that it would be a catastrophe if the other side prevailed.
Mr. Hungar, who represented Microsoft in the case, said that the outcome was best understood as being supported by a line of Supreme Court precedent, particularly from Justice Cardozo that supported i4i's position; he mentioned that he was "bludgeoned" by this precedent by the Court during oral argument. He mentioned that a possible factor in the Court's apparent change of heart regarding patent cases may be the recent change in personnel, noting that Justice Stevens (due to his antitrust experience) was "one of the most skeptical" members of the Court regarding patent rights, and that Justice Souter had also expressed skepticism of "as much legal protection" of patent rights advocated by its proponents. He sees Justices Sotomayor and Kagan as having a different view, admitting that it will take "years" for the effects of their views on patent law to be properly appreciated.
Mr. Clement next provided his comments, and took a slightly broader view. He reminded the audience that in the seven patent cases decided in the past five years (including eBay Inc. v. MercExchange, L.L.C., KSR Int'l Co. v. Teleflex Inc., MedImmune, Inc. v. Genentech, Inc., Microsoft Corp. v. AT&T Corp., and Quanta Computer, Inc. v. LG Electronics, Inc., excluding Bilski v. Kappos) the Court ruled 59-2 (with 2 recusals) against the Federal Circuit. Thus, this term is the anomaly he said, particularly when it is remembered that the Court reverses generally about 70% of the time.
Mr. Clement also mentioned the lack of circuit split in Federal Circuit cases, which skews the results even more in favor of reversal: the Court takes some cases based on the existence of a circuit split even if they believe the appellate court came to the right decision just to resolve the split, and that possibility does not exist for Federal Circuit cases. He said that while it may be expected that the Court would show "some greater sense of deference" to the Federal Circuit's expertise, the present situation may be the result of how the Court reacted to the creation of the Federal Circuit 30 years ago. It appeared, he said, that the Court "breathed a sigh of relief" that it did not need to consider patent cases as it had previously, and that the Federal Circuit "took its cue" from the Court and began to act as a "court of last resort" regarding patents. As a consequence, Mr. Clement posited that the Federal Circuit came up with rules that would make it easier to handle its docket and to give relatively clear rules to district courts that otherwise rarely encountered a patent case.
In addition, Mr. Clement suggested that the Court "gently walked away" from statements by Justices like Cardozo and Douglas that "really didn't make a lot of sense." When the Supreme Court began to review Federal Circuit decisions, it relied on its own precedent -- including those Justice Cardozo and Justice Douglas opinions -- and did not take into account 20 years of (relatively unfettered) Federal Circuit precedent and the "settled expectations" it raised. Because he doesn't see this "basic dynamic" to have changed, he thinks the recent affirmances will not become a trend but rather that the Court will continue to reverse the Federal Circuit. While he agrees that the new Justices have apparently differing views on patenting than the Justices they replaced, he also noted again that the lopsided nature of the Court's opinions reversing the Federal Circuit are not likely to be affected by their votes.
Mr. Clement also credited the Solicitor General's views as being important in the Court's i4i decision, saying that when the parties and amici argue (as they did in i4i) that "commerce as we know it will grind to a halt" if the other parties' views are upheld, the Court looks to the Solicitor General as an "honest broker." In this regard he noted that the Court "almost routinely" sides with the SG's position, and that since the SG has recently sided with the accused infringer, the Court's decisions have predominantly been against the patentee. Part of the "differential dynamic" between the Supreme Court and the Federal Circuit is that it is rare for the SG to file an amicus brief in the appellate court, according to Mr. Clement (a comment that should resonate with anyone contemplating a possible Supreme Court decision in AMP v. USPTO).
Mr. Waxman also mentioned the role of the Solicitor General, and recounted his experience that a great deal of "heated advocacy" occurred within the Executive Branch in an effort to influence the Solicitor General's position. Typically in patent cases this involves debate between the Patent and Trademark and Copyright Offices on the one hand and the Federal Trade Commission and the Antitrust Division of the Department of Justice on the other; he characterized these as the "liveliest of bloody debates," which occur before the Solicitor files its brief. He noted a potentially "harmful" effect of this tendency (coupled with the Supreme Court's penchant for relying on the Solicitor as an "honest broker" that reflects the "broad, long-term interests of the U.S."): while the Supreme Court Justices are not technically trained and do not have a deep understanding of patent law, the lawyers in the Solicitor General's office and the government in general have no expertise in commerce -- "people in government tend to be people who have been in government" and not involved in innovation or who have an understanding of how innovation works. While he credits these people as being "well meaning and smarter and more hard-working than people in commerce," he argued that they lacked the critical expertise in "the market and labs and the venture capital world."
Judge Michel raised the issue of the role of Congress in defining patent law, and the changes over the past 30 years on the perception of patenting and the economy. He noted in this regard President Obama's mention of patents in his State of the Union address and elsewhere, and how patent stories have moved from the business section (and obscure positions there) to the front page, so that the Federal Circuit no longer works in "relative obscurity." Returning to the Supreme Court, Judge Michel noted that the KSR case was the first time the Court had considered obviousness since the late 1960's and that Justice Stevens was the only member of the Bilski Court that had considered subject matter eligibility previously (Parker v. Flook, Diamond v. Chakrabarty, Diamond v. Diehr). He stated his belief that one possibly positive consequence of the Court's renewed interest in patent cases could be greater familiarity with patent law.
Mr. Clement responded to Judge Michel's comments by stating that he believed the Court's interest in patent cases is "here to stay" because patents are "too darned important" to be left to the Federal Circuit. He said that patent reform (while "like the poor is always with us") is important because the Supreme Court decides many patent cases as statutory interpretation cases, frequently finding little support for the Federal Circuit's interpretation of the statute in the statutory language itself. For a "textually focused" Court, it is easy to overrule the Federal Circuit's more specific rules in favor of the Court's more general standard based on the statutory language. However, if Congress speaks clearly, the Court may be less likely to rely on 19th Century precedent or language from Justice Cardozo in deciding patent cases according to Mr. Clement.
In response, Judge Michel noted that the 1952 Patent Act was written very tersely and reads "more like a constitution than a statute," noting the difference between this way of writing a statute and how statutes are written today. This has led to judicial interpretation of the statute (subject to Supreme Court interpretation and revision), which may be less likely if Congress amends patent law to be more definite.
Mr. Hungar agreed with these sentiments, and with Mr. Clement's point that the Supreme Court is very confident in construing statutes but is less confident in the patent area, based on the Justices' recognition that their expertise does not lie in either patent law or the real world consequences that may arise from their pronouncements. This results in a reluctance for bright line rules and a tendency for the Court to "muddy up" Federal Circuit rules that are too restrictive, citing the Court's Bilski decision as an example. This leads to another of the Court's tendencies, to decide patent cases on a "case-by-case" basis.
Judge Michel then asked the panel whether the Supreme Court utilized what he called its "constitutional law mode" of decision-making when deciding patent cases, invoking multifactor weighing tests that result in there being no answer to any question until the Court has opined. He noted that in his view the consequences of this way of addressing patent cases ignore the reality that most of what happens in patenting does not happen in court, but in the real world where clients need guidance with predictability if not certainty about what they can do and what they cannot do. Mr. Waxman followed up on these thoughts by noting that companies and investors in some industries, like biotechnology, have "substantial lead times" and require equally substantial investment, and that venture capitalists in their amicus brief in i4i voiced their view that they could not function in a world where their patent attorneys could only say "who the hell knows?" about patent validity and viability based on uncertainties introduced by general guidance in Supreme Court opinions. He said that these actors told the Court that if this were to be the case, they would move to a different technology (or a different country) with all the negative consequences that would entail for American innovation. He also characterized as "scary" the prospect that "nine unelected Justices" would enunciate specific rules that would apply "for all time," acknowledging that the Justices appreciated their inability to make such universal rules in the face of the inherent uncertainty about where innovation will arise in the future.
Mr. Hungar raised the point that cases like eBay and MedImmune must be appreciated differently than cases like KSR and Bilski based on how the Court views them. In the former cases, the Court "gets its mojo back" because it understands the issues -- the standard for granting an injunction, when a party is entitled to declaratory judgment jurisdiction -- and applies generally applicable standards that apply in all other areas of the law. In patent law-specific cases, the Court is reluctant to engage in the kind of judicial lawmaking that characterized its explication of the Sherman Act in the last century, because judicial lawmaking is not well suited to making economic policy. In contrast, the Court has a "serious adverse reaction" to Federal Circuit decisions that apply patent-specific interpretations to standards such as when a prevailing party is entitled to an injunction -- "they want none of it." Mr. Waxman (who represented eBay) noted the incongruity that arose in the eBay case, where both the district court and the Federal Circuit each applied the four-factor test for granting an injunction (albeit coming to different conclusions), in the face of a Supreme Court mandate that the courts apply the four-factor test on remand. He also said that the consequence of the Court's eBay decision has been "utter confusion" in the district courts and that "untold amounts of money" have been spent in legal fees litigating injunctions in the face of this uncertainty. He also noted that, perversely, the eBay decision created an incentive for patent holders to sue, if they could, before the International Trade Commission, where the prevailing patentee is entitled to an injunction by statute. He also said that the Court's eBay decision upset the calculus of damages calculations, because in the absence of the possibility of an injunction, patentees were faced by de facto compulsory licenses.
In the panel's final topic for discussion, Judge Michel stated his belief that much of what the Supreme Court decides is framed by the language -- and rhetoric -- of how the questions and arguments are presented to the Court, noting the possibility for disconnect with reality; for example he professed his view that there was never a Federal Circuit "rule" that a prevailing patentee "always" was entitled to an injunction. In this regard, he discussed the Bilski opinion and the argument that all business method patents were "bad" and how in Prometheus, the same argument was being made regarding diagnostic method patents. Judge Michel also mentioned Justice Stevens' idea that patent claims should be "deconstructed" to their "core" in deciding questions of patent eligibility, and the theoretical and practical deficiencies of that approach. Mr. Hungar voiced the view that the Court generally saw beyond (or through) the rhetoric, and Mr. Clement stated his view that the greater frequency of the Court addressing patent issues should result in the Court becoming more adept at appreciating the subtleties in those issues and arguments.